NEW YORK – U.S. stocks fluctuated as investors weighed better-than-estimated bank earnings against Federal Reserve concerns about valuations for some social-media and biotech companies.
The Dow Jones Internet Composite Index slumped 0.5 percent and the Nasdaq Biotechnology Index lost 1.6 percent. Pandora Media Inc. and Facebook Inc. slid more than 0.7 percent. Lorillard Inc. dropped 8.4 percent after Reynolds American Inc. reached agreement to buy its rival for $27.4 billion including debt. JPMorgan Chase & Co. and Goldman Sachs Group Inc. increased after the banks reported better-than-estimated earnings.
The Standard & Poor’s 500 Index fell 0.1 percent to 1,974.63 at 1:52 p.m. in New York. The Russell 2000 Index of smaller companies slumped 0.8 percent. The Dow Jones Industrial Average rose 4.82 points, or less than 0.1 percent, to 17,060.24. Trading in S&P 500 companies was 21 percent above the 30-day average for this time of day.
“There was a short-term reaction there to that comment and the markets pretty much digested it,” Walter “Bucky” Hellwig, a Birmingham, Ala.-based senior vice president at BB&T Wealth Management, said in a phone interview. “What it did is throw some cold water on some of the better earnings reports that were out earlier and had the markets on a roll. For a long-side investor it was disappointing that she had to use those terms specifically.”
Small-caps and Internet shares were the biggest victims of a market retreat earlier this year as investors dumped the best performers of the bull market amid concern valuations advanced too far. The Russell 2000 climbed back from a low in May to within a point of its all-time high on July 3. Selling in Internet and biotech shares resumed last week, sending the Russell 2000 to a loss of 4 percent, its biggest decline in two years.
The S&P Smallcap 600 Index trades at 26 times reported profit and the Nasdaq Biotechnology Index has a multiple of more than 500, according to data compiled by Bloomberg. The broader S&P 500 has a price-earnings ratio of 18, the highest level since 2010.